On certified appeal from the Law Division to the Appellate Division of the Superior Court.
For reversal and remandment -- Chief Justice Weintraub, and Justices Heher, Wachenfeld, Burling, Jacobs, Francis and Proctor. For affirmance -- None. The opinion of the court was delivered by Heher, J.
Our primary function here is the assessment of the content, meaning and legal efficacy of agreements made July 23, 1912 and September 13, 1955 between the plaintiff Borough of West Caldwell and the defendant Borough of Caldwell, adjoining municipalities in the County of Essex, providing for the construction by Caldwell of a sewage disposal plant within the limits of West Caldwell and the reciprocal use of the facility by West Caldwell on prescribed terms and conditions.
West Caldwell invokes the Declaratory Judgments Act, N.J.S. 2 A:16-50 et seq., for a construction of the contracts and a declaration that it may withdraw "house service * * * and lateral connections" from the Caldwell "sewer system, mains and disposal plant" at "such time or times and in such manner" as "in its best judgment shall be necessary and desirable in [its own] interest" and that of "its citizens, and as the circumstances warrant," and of the "terms and conditions, if any," of such withdrawal; and it appeals from an adverse judgment of the Law Division of the Superior Court adjudging that the "contracts" in question are "contracts in perpetuity" and their provisions are such that it "does not possess the legal right to withdraw house service connections and lateral connections from the existing Caldwell sewer system." The appeal is here by our certification, sua sponte.
In sum, the contention is that the "1912 agreement and the 1955 amendment constitute an option contract" and West Caldwell "has the right to withdraw from the Caldwell system," and the construction contra renders the "contract and the amendment ultra vires."
Caldwell maintains that it would be "unreasonable and inequitable to construe either or both contracts as permitting West Caldwell to remove existing house and lateral connections from the Caldwell sewage-disposal system," or "to permit West Caldwell to erect an independent sewage system within the reasonably foreseeable future."
The agreement of July 23, 1912 recites that Caldwell "is contemplating the construction of a system of sanitary sewerage for the accommodation of [its] inhabitants * * *, and for the proper completion and operation of said system, and for the well being of the public of" Caldwell and West Caldwell, "it is considered wise and prudent to locate the disposal plant for the treatment of the sewage matter from" Caldwell "within the limits" of West Caldwell, "and to lay connecting mains from [Caldwell's] system through and under certain streets and lands in" West Caldwell, and "the inhabitants" of West Caldwell "may now or hereafter desire to avail themselves of the construction and existence of said sewer, within [its] limits, for their own use and benefit by the consent of and under regulations to be established by" Caldwell. And the writing bears witness to these promises and undertakings:
(1) West Caldwell, "in consideration of this agreement and of the benefits to be derived therefrom to [its] inhabitants, * * * has consented, and does hereby, in virtue of the powers conferred upon it in an Act of the Legislature * * * entitled 'A General Act Relating to Boroughs (Revision of 1897)' approved April 24th, 1897," as supplemented and amended, "consent that" Caldwell "may lay such pipe and mains for the conveyance and discharge of sewage matters through the territory within the limits" of West Caldwell, "and construct all such necessary manholes and basins, and building the necessary disposal plant to treat and dispose of the sewage matter thus conveyed and collected, all in accordance with the plans and specifications agreed upon and approved by the parties hereto, and accompanying this document," with full right of "ingress and egress to and along the streets and lands upon and across which the same shall be erected" for the repair and maintenance of "such pipes and structures," provided that the disposal plant to be constructed in West Caldwell shall be in accordance with "designs, principles and plans" approved
by the State Board of Health, and that the plant so erected "shall be maintained and operated under the strict supervision" of the Mayor and Council of Caldwell or its duly authorized agents "in strict accordance with all rules and requirements" of the State Board of Health; and
(2) "* * * to the end that the said sewerage system, when completed, shall be available for use by the inhabitants" of West Caldwell, "so far as reasonable and proper," Caldwell, "by virtue of the power and authority conferred" by the cited statutes, "does hereby consent and agree that" West Caldwell "may make use of the mains so constructed and to be constructed within [its own] limits, under proper rules and regulations to be adopted by" its Council, "and strictly in accordance with the terms of this agreement for the use and accommodation of as many of [its] inhabitants as may be located within the natural drainage area, so that, the use of the said sewer may be strictly by gravity discharge," provided that West Caldwell "may, if it be found necessary, install a pumping system to pump the sewage matter from houses situated on Fairfield Avenue, formerly known as Dutch Lane, South of the Simon Van Ness house, into the sewer system hereby provided for"; and
(3) since "it is the intent of this contract to provide for the accommodation of the inhabitants of both the said Boroughs," as therein "defined, * * * with proper and necessary sewage discharge," both parties agreed to "exercise all necessary and property [ sic ] precautions" for the "protection and safety of the said sewer and of the public during both the construction and subsequent maintenance of the said system," but Caldwell was not thereby to be relieved "from the cost of constructing and protecting and maintaining" the sewage disposal system, "also the trunk and the main sewers leading thereto, within" West Caldwell, "or from its responsibility or liability to the public for any improper method or negligence" in "constructing and maintaining the same"; and
(4) West Caldwell "shall have the right to make direct house connections with the * * * main or trunk sewer,"
and to "connect lateral sewers therewith," therein referred to as "house and lateral connections respectively," in accordance with the conditions and subject to inspection fees and service charges therein laid down, a "special rate" to be given "for all buildings not in the dwelling house class"; and
(5) in the event that West Caldwell should default in the stipulated payments "for the use of sewers," as therein provided, Caldwell was accorded the right, upon 60 days' written notice, "to shut off all connections with the * * * sewerage system," or "at its option, after said notice, in consideration of a further use of the said sewer by any householder in" West Caldwell, to "collect the proper amount due from such user, giving proper credit therefor" to West Caldwell; and there was provision for arbitration in case a dispute should arise as to "a fair charge for any special rate [therein] provided for"; and
(6) the "sewer and disposal works, exclusive of laterals and connections laid by" West Caldwell, shall be the "exclusive property" of Caldwell, and the "cost and responsibility of * * * care and maintenance" shall be borne by it; and "[a]ll laterals and connections constructed by" West Caldwell "within [its own] limits" shall be and remain its "exclusive property," and the burden of its care and maintenance shall devolve upon it; and
(7) all provisions of the "contract relating to the rates to be paid" by West Caldwell "for the use of the * * * sewer for the drainage of houses and other buildings shall be in force for a period of five years from the date when this contract takes effect," and in the event the parties were "unable to agree" on the rates for continued service, provision was made for arbitration, the rates so determined to "remain in force for a period of at least five years after they become effective," and thereafter, absent agreement, "either party may bring about a re-adjustment of rates" by the same arbitral process, "after the expiration of each five year period"; and
(8) Caldwell agreed, "in consideration of the consent for the construction of the * * * mains and sewage disposal works" therein given, "to restore all streets and roadways within" West Caldwell, "the surface of which shall be opened or disturbed" by Caldwell "in the prosecution of said work, * * * as speedily as possible," to the end that traffic should not be unduly "delayed or incommoded."
Caldwell was incorporated as a borough in 1891, and West Caldwell in 1904, each thereby separating from the Township of Caldwell. The Borough of Caldwell comprises 723 acres of land, and West Caldwell covers 3,232 acres. In 1910, West Caldwell's population was 494; its land was largely used for farming; it had but "a few private residences." Caldwell's population was then 2,236; it was "primarily a residential community but also the shopping center for the surrounding countryside"; and it was found that a "sewage disposal system" was essential to its own needs. It is stipulated that "[d]ue to its limited area and high land, it was concluded to locate the plant in West Caldwell in the low Hatfield Swamp area, west of Passaic Avenue, its present location," and since West Caldwell's "consent" was "required" under L. 1907, c. 285, Caldwell initiated the "negotiations" which eventuated in the agreement of July 23, 1912.
Construction of the "Caldwell sewerage system" was begun early in 1913, and the completed structure went into operation early in 1915; thereafter, "from time to time, as the needs arose, improvements were made to the ...